When a company decides to split its stock, it generates a lot of excitement. A stock split occurs when a company increases its number of shares outstanding by dividing existing shares or by multiplying share count and reducing share price to compensate. Although a stock split lowers share prices, it doesn't change the fundamental value of a business itself or the total value of the shares you own.
Lower stock prices for a growing business attract a lot of retail investor attention. For example, after splitting their shares in 2020 and 2021, prices for Apple (AAPL 0.8%) (4-for-1 split on Aug. 28, 2020) and Nvidia (NVDA 0.43%) (4-for-1 split on July 19, 2021) both zoomed higher.
Several high-profile stock splits have made headlines in 2023. Here's what you need to know about recent high-profile stock splits for 2023.
Stock splits in 2023
Stock splits in 2023
2023 has been a relatively quiet year for stock splits.
| Company | Stock Split | Announcement Date | Ex-Date | Payable Date |
|---|---|---|---|---|
| PACCAR (NASDAQ:PCAR) | 3-for-2 | December 6, 2022 | January 17, 2023 | February 7, 2023 |
| Monster Beverage (NASDAQ:MNST) | 2-for-1 | February 28, 2023 | March 13, 2023 | March 27, 2023 |
| Churchill Downs (NASDAQ:CHDN) | 2-for-1 | April 25, 2023 | May 5, 2023 | May 19, 2023 |
| Novo Nordisk (NYSE:NVO) | 2-for-1 | August 10, 2023 | September 14, 2023 | September 20, 2023 |
1. PACCAR
Truck designer PACCAR announced its 3-for-2 split in December 2022. The company paid out an extra share of stock for every two shares owned by shareholders of record as of Jan. 17, 2023. The distribution took place at the close of the market on Feb. 7, 2023. PACCAR's last stock split was also a 3-for-2 split in October 2007.
2. Monster Beverage
The energy drink leader announced the stock split during its fourth quarter 2022 financial update on Feb. 28, 2023. For shareholders of record on March 13, 2023, Monster executed a 2-for-1 split by paying one extra share for every share owned; the stock price was halved to reflect the payment. The distribution took place at the close of the market on March 27, 2023. The last time Monster Beverage split its stock was a 3-for-1 split in November 2016.
Fiscal Quarter
3. Churchill Downs
Churchill Downs announced its 2-for-1 stock split on April 25, 2023. Shareholders of record on May 5 received an additional share for each share they own. The distribution took place at the close of market on May 19, 2023. Churchill Downs' last stock split was a 3-for-1 split in January 2019.
4. Novo Nordisk
Novo Nordisk announced its 2-for-1 stock split on Aug. 10, 2023. Shareholders of record on Sept. 14 received an additional share for each share they own. The distribution took place on Sept. 20. Novo Nordisk's last stock split was a 5-for-1 split in 2014.
Stock splits from 2022
Stock splits from 2022
As has often been the case, last year's stock splits were dominated by big tech companies that have been enjoying rapid growth and expect to continue expanding for many more years to come.
| Company | Stock Split Ratio | Announcement Date | Ex-Date | Payable Date |
|---|---|---|---|---|
| Amazon (NASDAQ:AMZN) | 20-for-1 | March 9, 2022 | May 27, 2022 | June 3, 2022 |
| Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG) | 20-for-1 | Feb. 1, 2022 | July 1, 2022 | July 15, 2022 |
| Shopify (NYSE:SHOP) | 10-for-1 | April 11, 2022 | June 22, 2022 | June 28, 2022 |
| DexCom (NASDAQ:DXCM) | 4-for-1 | March 25, 2022 | May 19, 2022 | June 10, 2022 |
| Tesla (NASDAQ:TSLA) | 3-for-1 | Aug. 4, 2022 | Aug. 17, 2022 | Aug. 24, 2022 |
| Palo Alto Networks (NASDAQ:PANW) | 3-for-1 | Aug. 22, 2022 | Sept. 6, 2022 | Sept. 13, 2022 |
1. Amazon
In March 2022, Amazon's board of directors announced it approved a 20-for-1 stock split for shareholders of record on May 27, 2022. After years of fast and steady growth, Amazon stock traded for more than $2,000 per share ahead of the stock division. The split reduced the share price to slightly more than $100 -- though Amazon stock has come under pressure since then due to the bear market. The last time Amazon split its shares was on Sept. 1, 1999, when it executed a 2-for-1 split.
2. Alphabet
Alphabet also announced a 20-for-1 stock split in tandem with its fourth-quarter 2021 earnings update in February 2022. Shareholders of record on July 1, 2022, received 19 additional shares for every share owned on July 15, 2022. The company's last split was in early 2014, before it changed its corporate name from Google to Alphabet.
3. Shopify
In April 2022, Shopify announced changes to its governance structure to keep voting power in the hands of co-founder and CEO Toby Lütke. Along with the changes, the company announced a 10-for-1 stock split to be executed on June 28, 2022, for shareholders of record on June 22. The e-commerce software provider is aiming to make ownership of its shares more accessible as it pursues long-term growth. This was the first time Shopify stock had split since its initial public offering (IPO) in 2015.
4. DexCom
Glucose monitoring technology company DexCom announced a 4-for-1 stock split in March 2022. The company executed the distribution of new shares on June 10 for shareholders of record on May 19, 2022. This was the first time DexCom split its shares.
5. Tesla
In late March 2022, Tesla filed a report with the Securities and Exchange Commission (SEC) indicating it would put a stock split proposal to a vote at its annual shareholders meeting. The company’s shareholders approved the 3-for-1 split during its annual shareholder meeting on Aug. 4, 2022, and it was implemented at the close of market on Aug. 24, 2022. The last Tesla 5-for-1 stock split took place in August 2020.
6. Palo Alto Networks
Cybersecurity leader Palo Alto Networks reported it would be initiating a 3-for-1 stock split when reporting its final fiscal quarter of the year in August 2022. The split was executed on Sept. 13, 2022, and began trading with an adjusted price the following day. This was the first time Palo Alto Networks had split its stock.
Why companies do stock splits
Why companies do stock splits
Stock splits (as well as reverse stock splits) typically do not change the fundamental value of a company, and they don't change an investor's ownership stake in the company. For example, if you own a slice of pizza equal to one-quarter of the whole pie, cutting your slice up into smaller pieces doesn't change the fact that you still have one-quarter of the total pizza.
Since a stock split doesn't really fundamentally change anything, why would a business choose to do one? Often it has to do with attracting new investors. A smaller price per share gets a lot of individual investors interested in a popular company.
Additionally, many publicly traded companies give employees an ownership stake in the business by granting them shares in the form of stock-based compensation. A smaller share price can help a business manage the benefits issued to its employees.
Employee Stock Ownership Plan (ESOP)
Also, many companies repurchase shares as part of a return on investment to existing shareholders. Again, a smaller share price can help a company manage the purchases and the return to investors.
Take Amazon as an example. In the filing for its stock split, the company made the following statement: "The Stock Split would give our employees more flexibility in how they manage their equity in Amazon and make the share price more accessible for people looking to invest in the company.”
Related investing topics
Should you invest?
Should you buy a stock because of an upcoming split?
If you are a long-term investor who plans to own shares of a company for at least a few years, an upcoming stock split is no reason to buy an ownership stake in a business. A company has good reasons for initiating a split, but it doesn’t change the fundamental value for shareholders.
Rather, when deciding whether to invest based on a stock split, look for companies that are benefiting from long-term secular growth trends, are growing faster than their peers, and have healthy profit margins and balance sheets.
